US

(Washington)

The Fed has seen a wild ride over the last 12 years—a crisis, QE, rate tightening, but after all the turbulence, it is effectively right back in the same pickle in which it found itself in ~2005-2006. That pickle is how to handle a very late cycle, high valuation environment, when the economy looks likely to overheat. 12 years ago the yield curve inverted, and could do so again next year as the Fed continues to tighten.


FINSUM: The Fed did not do very well in managing the last cycle, obviously, so there is no formula to handle this. Additionally, the big worry is that short-term rates got to 5%+ before the crash last time around, giving the Fed a lofty position from which to cut during the recession. That seems unlikely this time.

(Washington)

The SEC seems to have decidedly changed its approach of late. Under new chief Jay Clayton, the SEC has greatly cut back on fines and disgorgements. Over the last fiscal year, penalties have fallen by 15.5% to a four-year low of $3.5 bn. The total number of cases taken up by the SEC dropped 17%. Clayton has made boosting capital raisings his priority, and has indicated that fining companies may simply hurt shareholders.


FINSUM: In the years leading up to Clayton’s appointment, regulatory over-reach did seem to be hitting extremes. Though, one hopes a pullback in enforcement won’t lead to increased bad behavior.

(New York)

Here is an eye-opener. While the majority of Americans support capitalism, the opposite is true of Millennials. 42% of the generation that came of age during the Financial Crisis supports capitalism, while 51% say they oppose it. This is in contrast to average Americans, 60% of whom say they support capitalism. The results are from a Harvard University Poll conducted in 2016.


FINSUM: Millennials definitely hold a very jaded view of capitalism, not only because of the Financial Crisis (which so shaped them), but because we live in an era of escalating corporate power, unreachable home prices, and the threat of automation of all sorts of jobs.

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